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The role of digital transformation in mergers and acquisitions

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  • Yang, Nan
  • Li, Shanmin
  • Huang, Zhihong
  • Wang, Caiping

Abstract

How digital transformation influences mergers and acquisitions (M&A) in firms is a significant yet seldom-explored inquiry. We argue that, differing from the “winner-take-all” logic observed in M&A undertaken by born-digital enterprises, digital transformation initiatives pursued by traditional firms can enhance long-term M&A performance by mitigating internal control costs in terms of organizational inertia. The findings from an analysis of M&A activities conducted by publicly listed Chinese firms demonstrate that the digital transformation efforts of traditional enterprises possess the potential to substantially augment long-term M&A performance. Nevertheless, this facilitative impact may encounter limitations due to structural inertia, strategic persistence and external pressure. Moreover, when compared to “technology-based” digital transformation, “application-based” digital transformation exhibits a superior capacity to facilitate long-term M&A performance by alleviating routine rigidity. This study extends the application of organizational inertia theory to the digital economy era and provides practical insights for enterprises that are implementing digital-transformation strategies.

Suggested Citation

  • Yang, Nan & Li, Shanmin & Huang, Zhihong & Wang, Caiping, 2025. "The role of digital transformation in mergers and acquisitions," The North American Journal of Economics and Finance, Elsevier, vol. 75(PA).
    • Handle: RePEc:eee:ecofin:v:75:y:2025:i:pa:s1062940824002316
    DOI: 10.1016/j.najef.2024.102306
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